Reports& surveys

Another year, another set of headaches for the post production industry but, against all odds, it has come through the recession in a better shape than many might have expected, reports Jake Bickerton

If there’s one thing the post production sector knows a thing or two about, it’s finding a way to survive tough market conditions. Today’s post houses are battle hardened, adaptable and streamlined to striking levels of leanness. So, for the facilities industry at least, a ravaging global recession is just another on the list of things to struggle with. And struggle they have, but there’s been no blood bath in Soho this year; most of the companies that started the year have made it to the end. To put it succinctly, “It’s the same old crap as last year,” says Nicky Sargent, joint-md of The X Factor post house, The Farm Group.
That’s not to say it’s been a breeze, far from it. Most companies in our top 50 have had to cut staff levels this year and have been out in force trying to diversify their workload while keeping existing clients happy and coming back for more. As always, though, there are a handful of post houses that failed to make it through.

Post closures and lost brands
The largest of the casualties this year is Dean Street’s medium size facility Concrete, which closed down a few months ago, blaming cashflow and the lack of bank funding available. A little earlier in the year, long-standing audio specialist Wild Tracks went under too, and around the same time, Rocket (what was formerly M2) disappeared after a very short-lived merger with film processing facility iLab.

Also no more are Deluxe’s DI, post and duplication facility Arion and its DI facility, Midnight Transfer. Further brands to have bit the dust are DGP and Rainbow. Both companies were taken over by ex-Oasis TV md Gareth Mullaney and have since been merged into a single facility called The Mews at DGP’s offices on Greek Street. Other mergers include Glasgow’s Serious and Savalas, which have joined forces at Glasgow Film City under the SeriousSavalas umbrella, and Men From Mars, which closed down its Ealing Studios office and has been incorporated into sister company Molinare’s Soho office, as Molinare MFM vfx.

Another well established brand that’s been lost this year is blue, which has gone as part of Prime Focus’s global rebranding, bringing all its disparate brands under the single banner of Prime Focus. The group’s well-known US brands Frantic Films and Post Logic have also been lost. Also rebranding this year was Shoreditch’s Breathe, which became Air Post Production and marked the occasion by opening a new editing facility in Singer Street, around the corner from its Rivington Street office.

Moves and changes
Other key post changes include Technicolor Creative Services relocating its film lab from West Drayton to Pinewood and setting up a separate DI/grading-focused facility in Soho. Vince Narduzzo also went to Pinewood, relocating his boutique grading service from Soho.

Framestore closed its DI wing, which it blamed on increasing competition forcing DI prices down to “very silly” levels, as well as US film directors opting to post features closer to home. Smoke & Mirrors put the finishing touches to a £5m expansion into a neighbouring building, bolstering its vfx, grading and telecine services. It also opened up an offshoot branch in Shanghai. Meanwhile, Molinare closed down its TV studios, replacing them with a very spacious grading theatre, which will open by the end of the year.
New start-ups
Despite being in the throes of a recession, the year wasn’t without its new post production start-ups, though both were, perhaps naturally, boutique services with low, controllable overheads. In September, the Vfx Company (formerly The Mill Motion Control) set up a post house called 66, manned by a staff of four. It is run by ex-Lime md Nick Wortman and focuses on vfx and design for film, promos and commercials producers. Around the same time, a team of three ex-MPC employees set up a cg/vfx boutique called BlueBolt to assist and supervise vfx projects for features and high-end broadcast projects.

Job cutsThe most obvious impact the difficult financial climate has had this year is a series of job cuts, pay freezes and pay cuts. Many of the top 50 post houses have reduced staffing levels by a small proportion, leaving some of the biggest players, including The Mill, Framestore, Rushes and Evolutions, reportedly losing anything from five to 35 or more staff members each. A significant number of others, including TwoFour, The Joint, Dubbs/eyeframe and Glassworks, have also had to let one or two people go.

Prime Focus avoided making significant redundancies, opting instead for pay cuts across the board, which will be in place until the end of the year.

Further impact of the recessionPost houses have been bemoaning falling client budgets and dramatic undercutting by competitors for years, and a recession is never going to be the time when budgets are boosted and desperate undercutting ceases. So 2009 saw more of the same pressures, exacerbated even further by the recession. As one anonymous post house boss puts it: “We are cool, calm and serene above the water line and paddling like fury below.”

“We’ve had to adjust rates, which is very noticeable in offline, to coax work through the facility,” says Envy’s md Dave Cadle. “Finishing and online rates are reasonably steady but we’re seeing clients requesting to work at weekends so they can lock things off in time – if they are with us for six to eight weeks it doesn’t bruise us too much to do the occasional Saturday.”

Similarly, says George Panayiotou, facility manager at Films@59, “We’ve seen up to a 25% drop in production budgets over the last year and work very hard with our clients to identify where savings can be made, in production as well as in post.”
Jaia Lloyd, Platform Post’s marketing and new business manager, says that, bluntly: “Broadcast work is barely profitable and intensely competitive. We’ve had to start charging for extras that would previously have been absorbed, such as lunches, lay-offs, encodes and ftp. We’ve also had to negotiate with suppliers and freelancers on rates.”

Rushes’ Capper adds that “margins have been slipping for the last few years but in the last year there’s been an absolute need to adapt, and no faffing around. Staff need to be kept busy – the business can’t support it otherwise.”

Growth in 2010
Having managed to get through this year less damaged by the financial climate than expected, facilities are now moving forward with expansion plans for 2010. Envy, never one to rest for too long, is looking to the next phase of its development: “This part of Envy is almost concluded, and we’d like to continue to expand, so we’re looking at what’s happening outside the M25,” explains Cadle. “Don’t be surprised if by the middle of next year we own a new unit as we have to address the amount of work that’s going outside the M25.”

Envy isn’t the only top tier post house looking outside of London: “We have the maximum market share we’re going to get in London so we’re looking to the Nations and regions over the next 12 months,” says The Farm Group’s Sargent. “It won’t be a speedy thing. We’re not going to rush into anything as we’re in it for the long term.” And, she adds, “We’re still looking at sites in LA too.”

Other post houses planning to expand into new locations include Bristol’s Films@59, which is looking at a “possible geographical expansion to take advantage of work in the Nations,” says Panayiotou. West London’s Crow TV has also earmarked “expansion into other locations,” says md Will O’Connor. Meanwhile, Unit and Finish are both looking at moving into new buildings.

More post acquisitionsAs in any ultra competitive market, there are plenty of post houses looking to take advantage of failing businesses via acquisition. Prime Focus, which has built up its UK presence through acquiring brands such as the VTR group, Clear and Machine, is once more keeping an eye open for “company acquisitions which fit both our local and global business strategies,” says group communications director Tony Bradley.

The Mews’s Mullaney is also again on the acquisition trail, following his takeover of DGP and Rainbow this year: “We plan to continue to diversify through expansion – given that the industry in general is consolidating, we will more than likely acquire,” he says. Horacio Queiro, md at West London’s Clear Cut is another ready to pounce once a suitable post house becomes available. His aim is to “purchase a failing facility in the West End,” he says. And acquisitions aren’t going to be confined to the capital, either, with Manchester’s 422.tv facilities director Damien Lynch indicating his vfx-focused post production house is also planning to grow its business through acquisitions next year.